CBO Downgrades 2025 Economic Growth Forecast Amid Trump Tariff-Driven Inflation Surge

CBO Slashes Economic Growth Forecast for 2025 as Trump Tariffs Heat Up Inflation The Congressional Budget Office (CBO) released new economic projections on Friday, updating its outlook for the next three years. The report, which compares fourth quarter changes, shows that President Donald Trump's tariff policy, immigration crackdowns, and sweeping tax and spending laws are expected to increase jobless rates and inflation, while lowering overall growth this year. According to the CBO, the unemployment rate is projected to rise to 4.3% in 2025, up from 3.9% initially forecasted. Inflation is also expected to be higher than previously anticipated, with a 2.6% annual increase in consumer prices, compared to 2.1% initially predicted. The CBO's updated projections are based on the assumption that Trump's policies will continue to impact the economy throughout 2025. The report notes that while these policies may have some positive effects in the long term, they are expected to have a negative impact on economic growth and job creation in the short term. "We're seeing a slower pace of growth due to the tariffs and trade tensions," said CBO Director Keith Hall. "These policies are having an impact on businesses and consumers, leading to higher prices and reduced investment." The CBO's projections are in line with those of other economic forecasters, who have also warned about the potential negative effects of Trump's tariff policy. "The tariffs are a tax on American consumers and businesses," said Mark Zandi, chief economist at Moody's Analytics. "They're going to lead to higher prices, reduced investment, and slower growth." The CBO's report is intended to provide policymakers with a neutral assessment of the economy's prospects, allowing them to make informed decisions about policy. In addition to the CBO's projections, other economic indicators are also pointing to a slowdown in growth. The Federal Reserve has already lowered interest rates twice this year to stimulate the economy, and many economists are warning that further action may be needed. The White House did not respond to requests for comment on the CBO's report. Background: The CBO's original projections were released in January, before Trump's inauguration. The new report updates those figures based on current economic data and policy developments. Perspective: While some economists argue that Trump's policies will ultimately boost growth and create jobs, others warn about the potential negative effects of tariffs and trade tensions. Status: The CBO's projections are a neutral assessment of the economy's prospects, intended to inform policy decisions. However, the report's findings have sparked debate among policymakers and economists. Next Developments: The CBO will continue to update its projections based on new economic data and policy developments. Policymakers will also be watching closely for signs of improvement or deterioration in the economy. *Reporting by Fortune.*